Uganda: Oil Refinery, Pipeline Deals Set To remodel Regional Outlook

Uganda: Oil Refinery, Pipeline Deals Set To remodel Regional Outlook

The laying of the foundation stone for the construction of the world’s longest heated crude oil export pipeline from Hoima to the Tanzanian port of Tanga, on the day Uganda additionally introduced that it had agreed mission terms for an oil refinery, is a large step in turning the area into an oil frontier.

The 2 initiatives, with a combined worth of more than $8 billion, could flip across the investment outlook of the region, attracting capital into totally different industries.

On Saturday, President John Pombe Magufuli of Tanzania and Uganda’s Yoweri Museveni set the stage for the development of the pipeline, which, according to a press statement, is “a landmark occasion in the history of each countries.”

On the same day, Uganda’s ministry of vitality issued a statement where it famous: “The federal government of Uganda has agreed core challenge phrases for the Uganda Refinery Project with the Albertine Graben Refinery Consortium (AGRC) for the development of a greenfield oil refinery.”

The ministry added: “The agreement of the core undertaking phrases alerts the beginning of authorities discussions and negotiations with the consortium on the Mission Framework Agreement (PFA). The PFA will element the proposed options, validation of the solutions, threat mitigation measures, and extra due diligence necessary for accelerating investments and financing for the mission.”

The statement identified that the consortium will have the advantage of exclusivity throughout this interval of negotiations and should the parties agree on all phrases, the consortium might be granted the rights and licenses to develop and handle the refinery as lead investor in a joint venture partnership with authorities.

The Venture Framework Settlement, in accordance with the assertion, is expected to be concluded and signed inside the subsequent two months. Progress over the 2 oil infrastructure projects, nonetheless, offers little clarity on the timelines and mission implementation, one thing that traders are likely to look out for.

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Additionally, there has not been an official communication on who the contractor of the pipeline is. Sources have, nevertheless, told us that Chinese language firm Cnooc will likely be in command of the development of the pipeline.

Completely different sources said a variety of staff from China have already flown into the nation and are working intensely to have the designs in place in preparation for the development of the pipeline.

Additionally, meetings between Whole E&P and Cnooc – the 2 principal joint venture companies – are said to have intensified lately as the they race to have a pipeline in place by 2020 at the earliest.

In keeping with what our source informed us, French firm, Whole E&P, will mainly provide you with the research and the sourcing for the financing, whereas Cnooc will lead construction of the 24-inch diameter pipeline.

Tullow Oil, the third accomplice on this joint venture partnership, might be a non-operator and will solely contribute its share to the financing of the pipeline.

The problem of Tullow’s role continues to be not clear, especially after the company’s changes at the top management. The corporate introduced in Could that Paul McDade, who has been at the corporate for 16 years, has changed Aidan Heavey, sixty three, as the chief executive officer of Tullow.

Heavey has taken on a brand new role because the non-government chairman of the corporate. Ian Springett, the chief financial officer, not too long ago resigned from Tullow’s board, citing sick-well being. He has been replaced by Les Wood, who joined the company two years in the past.

Heavey’s departure from the most influential position in Tullow Oil may signify a change in the company’s technique, particularly in markets similar to Uganda’s. Tullow is attempting to complete the sale of twenty-two per cent of its stake in Uganda to Total and Cnooc.

But the deal might meet some resistance. It is not clear whether government will slap a 30 per cent capital gains tax on Tullow’s $900 million sale.

Tullow has said that of the $900 million that it intends to get at the completion of the transaction, $seven-hundred million will probably be spent as part of its share within the mission growth price for the crude oil pipeline and its attendant infrastructure.

On that foundation, Tullow sees no motive of paying capital gains tax, and has effectively asked for a personal ruling on whether the transaction ought to entice tax.

The shareholding construction of the oil pipeline will not be clear. Uganda will hold a 15 per cent stake in the crude oil pipeline from Hoima to the Tanzanian port of Tanga, the place this participation is bound to be interpreted as extra of a state assure for the undertaking, particularly in accessing land, than a name to speculate money.

Through the latest signing of the inter-government agreement, which spells out a working framework between Uganda and Tanzania on the pipeline, Irene Muloni, Uganda’s power minister, said Uganda will take part by way of the country’s nationwide oil company.

“This level of shareholding is according to the state participation stake within the upstream oil fields beneath the current Production Sharing Agreements,” she said.

Uganda continues to think about the event of an oil refinery as its main precedence. With the nation going through a debt burden already because of the large infrastructure initiatives occurring, it is hard to see Uganda committing large sums of cash to the pipeline.